China's Ministry of Commerce (MOC) on Wednesday announced Coca-Cola's bid to acquire China Huiyuan Juice Group failed to meet the country's anti-monopoly law.
The announcement has aroused a heated debate both among Chinese and foreign investors.
Major corporate mergers are always subject to tough regulatory scrutiny. This is a common policy adopted all over the world to ensure corporate mergers do not result in market monopolies which harm the welfare of consumers.
An antimonopoly review mechanism, properly employed, ensures fair market competition and is not connected with protectionism in any way.
From the European Union (EU) to the United States, many countries have their own antimonopoly bodies, which rule for or against major corporate mergers according to their versions of the law.
For example, the European Commission is the antimonopoly body of the EU. According to its antimonopoly law, not only major corporate mergers within EU nations are subjected to regulatory reviews, but mergers involving multinationals that have a considerable business base in EU nations also have to pass the review before they can actually go ahead.
In the United States, the Justice Department and the Federal Trade Commission are two agencies responsible for antimonopoly reviews.
The latest possible merger deal between International Business Machines Corporation (IBM) and Sun Microsystems has to pass a regulatory review before it can become a done deal.
Proper antimonopoly reviews always stand out against protectionist measures.
Antimonopoly reviews employed by regulatory bodies around the world are meant to protect the broader welfare of millions of consumers with an eye for expanding competition, but protectionist measures aim to shield one country or one group of people from competition.
While it is reasonable to set up an antimonopoly review mechanism to enforce fair competition, it is really absurd to reject fair competition with protectionist measures supposed to drive out foreign investors.
With the ongoing global financial crisis, the need to protect consumers with proper antimonopoly reviews still exists. But for those protectionist measures adopted in the name of proper antimonopoly reviews, they should be met with a resounding "no." Other protectionist measures under the guise of protecting national security should also face the same fate.
As for the case of Coca-Cola bidding to acquire Huiyuan, the Chinese government has made it clear that it is a purely regulatory decision based on China's antimonopoly law.
MOC spokesman Yao Jian said on Thursday that the decision would have no effect on China's policy in accepting foreign investment.
Yao said the ministry made the decision based "on sufficient investigation and research, on the basis of facts, and strictly in line with the country's anti-monopoly law."
China's Foreign Ministry spokesman Qin Gang echoed Yao's comments, saying the rejection of the bid was in no way protectionism.
"Products of the Coca-Cola company are available anywhere in China's market. The country's market is fully open to foreign companies," Qin said.
As the global financial crisis has dragged many developed countries into serious recession, many international investors have seen good opportunities in China as the country is fighting the global downturn with measures to expand its domestic demand.
For those international investors, the Chinese government has sent an unequivocal message that the decision to reject Coca-Cola's bid for Huiyuan is part of a proper antimonopoly review process and it has nothing to do with protectionism.
(Xinhua News Agency March 21, 2009)
